Hodling and the market: Easing through temporary losses
The market could become harsh and unpredictable, contrary to our early prediction, and these cause temporary and permanent losses depending on our next action. It must be stressed that the future of our portfolio rests on how we deal with market swings; thus, it is essential that we know what we are doing, especially that cryptocurrencies may cost us our fortune.
In this article, we will tackle the importance of hodling despite the market volatility and its implication when we won’t. While it can be worrisome to see your portfolio turn red each day as you bought prior to the dip, this should not be the source of your panic, especially since you are confident with your crypto project to prosper in the future.
A disastrous move
In 2017, BTC was in a bull run for months, and it enticed investors to buy it in fears of missing out on the opportunity to grow their money exponentially. At that time, many have bought at ATH with high hopes that it would continue to rise, but this was not the case.
As 2018 entered, BTC is now falling and enters its bear run, which lasted not only months, but years in the making. This is now where the disastrous move comes, selling prematurely. Many investors have lost hope in Bitcoin and took what they could salvage, thinking that the crypto was a lost cost.
The panic selling intensified when after a year, the market hadn’t recovered and even dipped further, prompting criticisms and regrets upon trusting in the project in the first place. While the sentiments are understandable that time around, if only they hodl their BTC a little longer, the wait would have been worthwhile.
Temporary and Permanent Losses
In the context of hodling, temporary loss occurs when the token’s price goes below its buying price. As an example, you bought 1 BTC on November 30, 2017, at the cost of $10,406. However, BTC’s price plunged a little under $3,406 per token after a year. By this time, you have a temporary loss of $7,000 as 1 BTC is only worth $3,406, a $7,000 difference from your capital of $10,406. When you sell your BTC in fear of losing all your remaining money at that time, that is where the permanent loss kicks in.
Crypto markets recover over time, especially those legitimate projects which are continuously developed to solve world problems and have more utility. When you sell your hodling, you will no longer be able to recover your loss when the market bounces back.
In the case of Bitcoin, although it recovered slow, it recovered more than the first ATH. It reached a whopping $69,000 per token. Those who haven’t sold their BTC had a net profit of $58,594, while those who sold had a permanent loss of $7,000.
The lesson here stresses the importance of hodling as the path to the moon is not always upwards; it has detours. It is very important to understand how the market plays as it is a major factor in decision making, either selling prematurely or buying more. Market dips are okay, so are temporary losses. What is to be avoided is premature selling which could only result in permanent losses.
PrivacySwap and the market
Bought PRV at $12.98, but the market is currently sitting at $2.21? So what? As long as you don’t sell, there is nothing to worry about. Temporary loss is nothing compared to the profit you’ll have if you are patient enough to wait for it to soar in the future.
Just like in the case of BTC, the key to financial success in crypto is hodling. Regardless of how the market plays out along the way, one should never forget that the market recovers in time as the only way is up.
It can be tempting to sell your tokens to salvage the remaining value of your tokens. It is understandable. This is always the case for neophyte traders who do not yet have a seasoned trader’s experience and attitude. I know because I was once like that.
But as an experienced trader, I can now say in confidence that when you have done your research about a crypto project, and you are confident that it will reach unthinkable heights, no matter how wild the market could be, just keep on hodling. This is because the moment you sell your tokens at a very low price, the permanence of your loss will be evident.
Just hodl, and you will be fine.
Also Read: The future of NFTs